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Jan 24, 2018

Xerox activist campaign highlights CEO targeting

Activists more prepared than ever to pursue ‘bold tactic’ of targeting management, research suggests

In a week when Xerox’s CEO has been singled out by an activist investor, FactSet data shared with Corporate Secretary sister publication IR Magazine, indicates that the number of campaigns targeting company management increased by more than 40 percent last year.

Carl Icahn recently teamed up with Darwin Deason to announce demands for a number of changes at Xerox, including that CEO Jeff Jacobson be ‘replaced immediately.’ Jacobson joins a growing list of CEOs who have been targeted by activist investors. The chief executives of Arconic and Buffalo Wild Wings, for example, left amid activist campaigns in 2017.

Icahn and Deason describe Jacobson in their announcement as being ‘neither qualified nor capable of running this company’ and ‘a member of the Xerox old guard.’ The two investors, who between them own 15 percent of Xerox, are also targeting four directors as part of their campaign.

Xerox released a statement saying its directors and management are confident with the strategic direction of the company and its ability to deliver value to shareholders.

According to data provided to IR Magazine by FactSet, there were 20 activist campaigns in the US last year that targeted company officers – up from 14 in each of the previous three years. The likelihood of a CEO leaving a company doubles within the first year of an activist’s involvement, according to separate research released last year (, 5/30).  

Number of activist campaigns targeting company officers in the US, by year
2017 20
2016 14
2015 14
2014 14

Source: FactSet

Although activists can have a disruptive effect on CEO tenure, they have historically been reluctant to directly target the corner office for fear that removing a CEO would be too destabilizing to the business, according to Charlie Koons, managing director of activism and contested situations at Morrow Sodali.

Koons tells IR Magazine that, although targeting a CEO can also paint an activist as adversarial rather than willing to work with the company management, a campaign against a CEO is increasingly seen as an effective way of getting the board’s attention.

‘In recent years some activists have sought to amplify their message of the need for change by targeting CEOs,’ he says. ‘It is clearly a bold tactic, but given that choosing the CEO is at the top of a board’s responsibilities, voting against the CEO can send shock waves across the entire board.’

Taking on a CEO is a bold strategy that only a handful of activists are adopting – Icahn, for instance, has previously targeted chief executives of companies such as AIG, Navistar and eBay. But activists are increasingly able to point to their track records to try to garner favor with the broader investor base, Koons adds.

‘Today’s activists have access to a much better-qualified pool of director nominees, including potential replacements for a targeted CEO,’ he explains. ‘There is no longer a stigma attached to being part of an activist slate.’

The increased appetite among certain activists to target company management shows the importance of shareholder engagement and positioning the CEO as the articulate figurehead of the company strategy, according to Patrick Tucker, managing director with Abernathy MacGregor.

‘IR people especially can make sure the CEO is doing two key things: ensuring he or she is building an understanding with investors of what the strategy is and how it’s linked to shareholder value, and explaining how the company decided on the strategy,’ he tells IR Magazine. ‘What you want is the rest of your investor base to disagree with an activist or see a disconnect with what the activist seems to be saying about your CEO.’